There's been a dramatic shift in why the world drinks coffee - and it's a boon for companies
People don't drink wine only to get drunk. Similarly, many people enjoy coffee for more than just an early-morning or late-night boost, according to Andrea Illy, the CEO of Italy-based Illycaffè.
"People were drinking lousy coffee with sugar and milk in order to get the caffeine kick in the morning," Illy said to Business Insider in a recent interview.
"There's no time any longer for that. Now, people enjoy the preparation; they enjoy the places where coffee is served; they enjoy the extensive range of preparation and origins that you can taste."
The key to this transformation in the coffee industry has been a surge in the amount of differentiation in roasts consumers can buy, which resembles what happened to the wine industry.
Illy said that growing up in Italy, there used to not be much awareness or concern about variation in wine. He observed that the maximum possible differentiation in wine used to be regional: a bottle of red wine from Tuscany, and white wine from somewhere else, for example. There was also very little distinction in terms of cultivars, or the plant varieties that winegrowers selectively breed to achieve a particular taste.
However, there are now more than 400 local Italian varieties, according to Illy. And these days, you'd be hard-pressed to find two bottles of wine that taste exactly the same.
The coffee industry has also seen a massive wave of independent cafes competing with each other by coming up with new ideas, preparation techniques, and recipes, combined with rehashing some old ideas that worked.
"You get new coffees like cold brew, siphon, and several other preparations that are in the market, compared to what used to be 10 years ago when you could only drink filtered coffee and maybe cappuccino," he said.
The differentiation in various coffee roasts is prevalent in the higher-end gourmet section of the market. Illy described his eponymous company as "super gourmet," and said it strives to be the world's leader.
But gourmet usually means more expensive. That implies that many companies looking to ride the upscale coffee trend may need to raise prices, possibly losing some customers. But they'd increase their margins because they are charging more.
This trade off between prices, margins and market share is something coffee brand managers everywhere are grappling with, Illy said.
The good news, however, is that consumers are willing to pay more than ever for a good cup of coffee, he said.
"There is only one reason to drink coffee nowadays, which is pleasure."